Question

Presented below is information related to equipment owned by Crane Company at December 31, 2020.

Cost		$9,090,000
Accumulated depreciation to date		1,010,000
Expected future net cash flows		7,070,000
Fair value		4,848,000

Assume that Crane will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 4 years.

Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	enter an account title to record the transaction on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2017	enter a debit amount	enter a credit amount

eTextbook and Media

List of Accounts

  

  

Prepare the journal entry to record depreciation expense for 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

eTextbook and Media

List of Accounts

  

  

The fair value of the equipment at December 31, 2021, is $5,151,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31

Answer 1

a
Account Titles and Explanation	Debit	Credit
Loss on impairment	3232000
Accumulated depreciation-Equipment		3232000
b
Account Titles and Explanation	Debit	Credit
Depreciation expense	1212000
Accumulated depreciation-Equipment		1212000
c
Account Titles and Explanation	Debit	Credit
No entry	0
No entry		0
Workings:
Cost	9090000
Less: Accumulated depreciation	1010000
Carrying Amount	8080000
Less: Fair value	4848000
Loss on impairment	3232000
Revised Carrying amount	4848000
Divide by Remaining life	4
Depreciation expense for 2021	1212000
Restoration of impairment loss is not permitted. No entry is required to record increase in fair value.